Fiscal credit supervision
Fiscal credit supervision is the independent supervision of the financial credit sector. It plays a vital role in promoting a stable and healthy development of the financial market with its long-term truth and fairness incentives. The purpose of fiscal credit supervision is to promote social economic and financial stability, increase economic efficiency and reduce economic costs. The objectives of fiscal credit supervision include prevention of financial fraud, prevention of default of payment on financial and other obligations, prevention of financial monopolies and abuse of power and regulation of government policies and institutions.
The main instruments of fiscal credit supervision are the credit finance of the central government and the policies and regulations of the credit finance system. The purpose of the credit finance system is to increase efficiency, reduce financial risk and control the misuse of the funds. The instruments include, among others, the regulations and guidelines of the central bank, regulations and guidelines of other bodies, pertinent regulations, guidelines and other framework documents, regulations related to information disclosure, and the regulations and guidelines of the financial market participants and other agencies involved in the regulation of financial markets.
The supervision of fiscal credit focuses on identifying and preventing financial risks and malpractices, as well as on improving the institutional environment. A key element of fiscal credit supervision is the timely collection and analysis of relevant information and data to assess the overall creditworthiness of financial and other market participants. Through this, the uncertainty surrounding the functioning of the financial market and its ability to deliver sound economic benefits to all economic agents is minimized.
The correct functioning of fiscal credit supervision has a direct bearing on financial stability and economic efficiency. When fiscal credit supervision is effective, investors and creditors are less likely to take excessive risks and are more likely to correctly gauge the true risks and returns of investments. Moreover, since fiscal credit supervision is aimed at reducing or eliminating misallocation of resources, economic efficiency should be improved.
Finally, fiscal credit supervision should facilitate the emergence of a well-functioning financial system, where all economic agents have access to fair and transparent pricing. This will increase financial stability, reduce market distortions and lead to more efficient resource allocation. By enabling agents to better know and assess the risks that they are exposed to, fiscal credit supervision can reduce the cost of capital and increase the opportunities for credit-worthy borrowers.
In today’s economy, fiscal credit supervision is a critical component of ensuring a stable and healthy financial sector. However, it is not enough in itself to guarantee the smooth functioning of the financial sector. To be effective, fiscal credit supervision requires close cooperation between central banks, ministries of finance, financial regulators, credit rating agencies, and other actors involved in shaping the regulatory framework. Appropriate implementation of fiscal credit supervision should be informed by an in-depth understanding of the economic environment, the applicable regulatory framework, and the flexibility needed to ensure that fiscal credit supervision is effective in meeting its goals of promoting financial stability and promoting economic efficiency.
